Asked by Marissa Gonçalves on May 14, 2024
Verified
Refer to Exhibit 8-2.If Walters pays for the purchase on March 31, 2010, what amount is recorded in the purchase discounts lost account?
A) $ 0
B) $ 2, 800
C) $14, 000
D) $28, 000
Purchase Discounts Lost
The extra cost incurred by a company for not taking advantage of the discounts offered by suppliers for early payments.
Perpetual Inventory System
A bookkeeping approach that documents inventory movements as they occur, ensuring the inventory balance is always current.
Net Price Method
The net price method accounts for purchases after subtracting discounts, essentially calculating the actual price paid for goods or services after all reductions.
- Apply concepts of purchase discounts, purchase returns, and allowances in inventory accounting.
Verified Answer
If Walters pays on March 31, they are outside of the 20-day discount period, so they do not qualify for the discount. The amount of the discount would have been $2,800 (4% of $70,000), so this amount is recorded in the purchase discounts lost account. Therefore, the answer is (B) $2,800.
Learning Objectives
- Apply concepts of purchase discounts, purchase returns, and allowances in inventory accounting.
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